Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
In 2020, the government of France re-imposed several months of strict confinement measures to curb the spread of the COVID-19. The government forced many small businesses to shut down entirely or change their business model to offer take-out or delivery options. Most companies switched to working from home through a virtual telework format. All major international trade shows were canceled or postponed. International travel and intra-region travel within France were also severely limited. During this period, U.S. companies interested in exporting goods and services or promoting in-bound investment had to adapt and evolve by conducting events through virtual conferences or webinars.
In response to the economic impact of the pandemic, the government of France launched a two-year €100 billion ($ billion) recovery plan called the Plan de Relance in September 2020. Emergency measures rolled out from March 2020 safeguarded household incomes and drove the uptick in consumption in recent months. However, lasting economic impacts on the productive capital and the deterioration of employees’ skillsets could compromise France’s growth potential. The bulk of the recovery plan aims to support employment in the short term and pave the way for the French economy of 2030, which will be greener, more competitive, and more inclusive. France’s Plan de Relance aims to bolster competitiveness through investments in critical sectors such as health, electronics, agrifood, and industrial 5G application. The plan also lays out objectives for France to become Europe’s first major decarbonized economy by achieving carbon neutrality by 2050 through ecological/green initiatives. France aims to improve productivity through training and workforce development programs to strengthen France’s industrial leadership and resilience.
The French central bank estimated on September 13th that France’s economy will pick up 6.3 percent in 2021 while the French government expects a 6 percent GDP growth. The rebound should extend into 2022, with growth remaining vigorous at around 4 percent, and economic activity projected to return to its pre-Covid level by the end of 2021.
Historically, the U.S.-French commercial and economic alliance is one of the United States’ oldest and closest. The United States and France established diplomatic relations in 1778. The United States’ first trade agreement, the Treaty of Amity and Commerce between the United States and France, was signed that same year. Relations between the United States and France have remained active and friendly. Our countries share common values and have similar policies on most political, economic, and security issues.
With a GDP of approximately $2.6 trillion in 2020 (down 8.2% in 2020, +1.5% y-o-y growth in 2019), France is the world’s fifth-largest economy and Europe’s third-largest economy after Germany and the UK. It has substantial agricultural resources and maintains a strong manufacturing sector, despite a recent decline. A dynamic services sector now accounts for an increasingly large share of economic activity and is responsible for most job creation in recent years. France initiated the G-20, is host to the OECD, and is a member of the G-7, the European Union, and the World Trade Organization, confirming its status as a leading economic player globally.
France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial markets, strong intellectual property protections, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks and public transportation, and efficient intermodal connections. In 2019, France was the ninth-largest global market for foreign direct investment (FDI) inflows. In total, there are more than 28,000 foreign-owned companies doing business in France. It is the home to 29 of the world’s 500 largest companies. In 2020, the World Economic Forum ranked France 9th in terms of global competitiveness economic transformation readiness. France was also ranked 4th in the “Countries with the Best Foreign Direct Investment Opportunities” 2020 annual survey of global business executives, financial advisors, affluent families, financial institutions, corporations, private investors, and high-to-ultra high net worth individuals that ranks markets that are likely to attract the most investment in the next three years.
Trade and investment ties between the United States and France are strong. On average, over $1 billion in commercial transactions, including sales of U.S. and French foreign affiliates, takes place every day. U.S. exports to France include industrial chemicals, aircraft and engines, electronic components, telecommunications, computer software, computers and peripherals, analytical and scientific instrumentation, medical instruments and supplies, and broadcasting equipment. The United States is the top foreign destination for French investment. By country of the ultimate beneficial owner (UBO), France entered the top 5 investing countries at the end of 2020 ($315.0 billion), moving up one position from 2019. The United States is the largest foreign investor in France in terms of job creation. In 2020, the United States was the leading foreign investor in France with a stock of foreign direct investment (FDI) totaling over $91.1 billion. More than 4,600 U.S. firms operate in France, supporting nearly 480,000 jobs. A total of 204 investments were recorded from the United States in France in 2020, creating 8,286 jobs, 5 percent more than in 2019. In 2020, the United States exported $42.9 billion of goods and services to France, down 28.8 percent from 2019. The United States and France have a bilateral convention on investment and a bilateral tax treaty addressing, among other things, double taxation and tax evasion.
Following the election of French President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms. Macron has buoyed ease of doing business in France by relaxing the rules on companies to hire and fire employees and offering investment incentives. However, Macron will likely delay or abandon the second phase of his envisioned reforms for unemployment benefits and pensions due to more pressing concerns related to the COVID-19 crisis.